Exhibit 10-1 Labor and output data In Exhibit 10-1, if product price is fixed at $8, the MRP of the 2nd worker is equal to:

Question

Exhibit 10-1  Labor and output data  In Exhibit 10-1, if product price is fixed at $8, the MRP of the 2nd worker is equal to:

Quizplus · Accepted Answer

The MRP of labor is calculated using the formula MRP = MPL x Product Price.

For the 2nd worker, MPL (Marginal Product of Labor) is calculated as the change in output (Q) for each additional unit of labor (L).

MPL = (Q2 - Q1) / (L2 - L1) = (120 - 80) / (2 - 1) = 40

Therefore, MRP of the 2nd worker = MPL x Product Price = 40 x $8 = $320

However, the MRP represents the additional revenue generated by adding one more unit of labor. So, to calculate the MRP of the 2nd worker, we need to subtract the MRP of the 1st worker (who was previously added) from the total MRP generated by both workers.

MRP of 1st worker = MPL x Product Price = 20 x $8 = $160

Total MRP of both workers = (MPL x Product Price) x Number of workers = (60 x $8) = $480

MRP of 2nd worker = Total MRP of both workers - MRP of 1st worker = $480 - $160 = $320

Therefore, the MRP of the 2nd worker is $320, which corresponds to choice (C).

Exhibit 10-1 Labor and Output Data in Exhibit 10-1, If